Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/63974
Authors: 
Koskela, Erkki
Ollikainen, Markku
Year of Publication: 
2002
Series/Report no.: 
ETLA Discussion Papers, The Research Institute of the Finnish Economy (ETLA) 815
Abstract: 
This paper analyzes the socially optimal forest taxation in the rotation framework when the government has a binding tax revenue requirement. In the Faustmann model the optimal design of taxation consists of non-distortionary taxes, such as site productivity tax, site value tax or profit tax. A combination of distortionary unit (or yield) tax and timber tax can also be used to collect the tax revenue in a nondistortionary way. In the Hartman model with forest amenity services as a public good, the optimal design consists of a non-distortionary tax and a Pigouvian tax, which adjusts the private rotation age to the socially optimal one. Now only the site productivity tax is non-distortionary, while unit, yield, timber, site value and profit taxes generally serve as corrective Pigouvian taxes. Finally, in the absence of a non-distortionary tax, if the marginal valuation of amenity services is non-decreasing with the age of forest stand, a combination of unit (or yield) and timber taxes can be used to both tax revenue collection and Pigouvian correction.
Subjects: 
rotation age
forest amenities
optimal forest taxation
JEL: 
Q23
H21
Document Type: 
Working Paper

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